After much delay, the Department of Labor fiduciary rule finally went into effect on June 9, 2017, providing consumers with enhanced protections when receiving retirement saving advice from financial advisors and investment brokers who manage consumers’ 401(k)s, IRAs, pension plans and other retirement assets.
The Fiduciary Duty Rule, which will continue to roll out through January 1, 2018, requires financial institutions and brokers to act as fiduciaries and put their clients’ financial interests ahead of their own when making recommendations or selling products for which the advisor may earn a fee. More specifically, the law eliminates a potential conflict of interest by requiring advisors to do the following:
1. Give advice that is in the “best interest” of the investor/customer and demonstrate both prudence and loyalty,
2. Charge no more than a “reasonable compensation”, and
3. Avoid misleading statements about investment transactions, compensation and conflicts of interest.
As a result of the law, many consumers can expect to receive in the future more detailed disclosures about the fees and commissions charged by financial institutions that solicit and/or recommend products and services to retirement savers. Yet, it remains the consumer’s responsibility to understand whether an advisor’s fees are reasonable and whether his or her investment recommendations are free of conflicts of interest. Consumer may research advisors online through the Financial Industry Regulatory Authority (FINRA) website at http://brokercheck.finra.org.
Many financial planners have long adhered to the fiduciary standard contained in the Employee Retirement Income Security Act of 1974 (ERISA) and conduct their businesses transparently and in the best interests of their clients. Additionally, many of the larger brokerage firms have already begun preparing for the fiduciary rule by either changing their broker compensation to a fee-based model, limiting commission-based compensation and/or offering investors a choice of fee structures and lower-cost investment products.
About the Author: Eric P. Zeitlin is managing director of Provenance Wealth Advisors, an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors and Accountants, and a registered representative with Raymond James Financial Services. For more information, call 800-737-8804 or email firstname.lastname@example.org.
Provenance Wealth Advisors, 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.
Eric P. Zeitlin is a registered representative of and offers securities through Raymond James Financial Services, Inc., Members FINRA/SIPC.
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